The Value of eBooks: Is $2.99 The New Value?

One excuse the big publishers used for going to the agency model of pricing was that Amazon's $9.99 price for certain bestsellers was undervaluing the books and would establish expectations in ebookers regarding maximum pricing. So, if that is true, how do these very same publishers justify putting certain ebooks on sale for $2.99 or less?

This question popped to mind when Little, Brown, a subsidiary of Hachette, put City of Veils by Zoe Ferraris on sale for $2.99. This is the second mystery book by Ferraris featuring the same Saudi Arabian investigative team. (Although this is not a review of the book, it is worth mentioning that it is a 5-star book that offers both a fascinating insight into Saudi culture and a great mystery.) City of Veils is neither the first nor the last ebook by one of the Agency 6 to be put on sale for $2.99 or less; such a sale seems to be a regular happening. (The first book in the series, Finding Nouf, is listed as discounted to $11.16 from the list price of $13.95, with neither price being a price I would pay for a fiction ebook.)

Which makes me wonder about the "value of ebooks" and whether we are seeing the erosion of price to where, eventually, Agency 6 fiction ebooks will be regularly priced at $7.99 or less and frequently on sale for $2.99 or less.

There has to be something magical about this $2.99 price point. Why $2.99 and not $4.99? Or $3.99? Both prices would be substantial discounts off the list price and even off the standard 20% to 25% discount price. I suspect the answer lies in what experience is rapidly showing as the price point for maximizing volume of sales. I also suspect that publishers are finding that ebookers are unwilling to pay more than $2.99 for an introduction to a previously unknown author. Yet, I don't see any evidence that after the introduction to a new author, ebookers are running to spend $11+ for other ebooks by the same author -- I know I am not.

But regardless of the motivation, isn't this $2.99 price point setting an expectation among ebookers as to what the correct price for an ebook should be? I find that it cements my belief that ebooks should be both DRM-free (which Tor, a Macmillan subsidiary, will be doing shortly) and list priced at no more than $5.99 and frequently discounted to $2.99 (or less). These Agency 6 discounts are also cementing my belief that I will only rarely pay more than $2.99 for any ebook.

The price point problem is exacerbated by other steps publishers are taking. I recently preordered Spycatcher with a bonus excerpt by Matthew Dunn, published by HarperCollins, one of the Agency 6, for 99¢. (The bonus excerpt is from Dunn's forthcoming new novel Sentinel, which can be preordered for a whopping $12.99!) At the same time, Spycatcher without the bonus excerpt is available for $9.99. This type of discounting with bonus material included happens regularly. My question to publishers is this: Why would I ever consider buying Sentinel for $12.99 or Spycatcher for $9.99 -- neither book nor the author being previously familiar to me -- when I expect that at some future date I will be able to buy them for significantly less? Doesn't your offering one of the books for 99¢ create an expectation in me, the ebooker? And even if I can't buy them in the future for $2.99 or less, why would I buy them at all -- regardless of how good a read the introductory book is -- at a price that has already demonstrated as far too high?

If there is any validity to the complaint of Amazon's $9.99 price point setting consumer expectations at a price that is unsustainable by the publishing industry, how are publishers fighting that expectation by offering ebooks for $2.99 or less? Why is the publisher's tactic sustainable but not Amazon's?

Valuing of ebooks is difficult. Yes, there are costs that can be objectively measured but those per-unit costs diminish with volume sales. I grant that each ebook cannot be looked at in isolation as best-selling ebooks need to subsidize those that do not sell well so that overall there is an industry profit. Yet, where previously the argument was that no ebook should be sold below a price that sustained the industry, which price was somewhere north of $9.99, Agency 6 publishers belie that argument by demonstrating that at least some ebooks can be sold for significantly less without damaging the industry. That action reraises the issue of what is an ebook worth?

The industry has put itself into a straitjacket of its own making. Originally publishers planned to window ebooks. Windowing of ebooks allegedly would let publishers subsequently publish the ebook version of a pbook at much reduced price, more in line with ebooker expectations. But after much protesting from ebookers, publishers ultimately went to simultaneous release. Unfortunately, with simultaneous release, publishers decided they could not price the ebook much lower than the pbook for fear of cannibalizing pbook sales, losing money, and devaluing the book.

Then to shore up the value of ebooks, agency pricing was instituted. It was touted as necessary for the health of the publishing industry -- from author to publisher. Now, within the past year, these same publishers are regularly pricing some ebooks at $2.99 or less, shattering the justification for the higher agency pricing.

In the end, I think publishers will find that $2.99 is the magic price point for ebooks. The combination of the self-publishing phenomenon that ebooks have produced, the use of the $2.99-or-less price point by self-publishers, and the apparent willingness of at least some of the Big 6 publishers to discount ebooks -- even if for just a limited time -- to that price point, will create an expectation in ebookers that publishers will be unable to combat. We may be a few years away from seeing that magic price point, but I suspect it is coming on fast.

Rich Adin

Related Posts

5 Comments

First, $2.99 is an arbitrary number set by Amazon which is the lowest price indies can set a price and still receive 70% royalties. If you price at 2.98 or below, royalties drop to 35%.

Second, the real question here is: how much promotion can you do at a $2.99 price point? (or a 99 cent price point). Very little if you’re a relative unknown. The price point has to become the buzz.

Third, you might remember booksforabuck.com where all ebooks start out as a promotional price of $1 only to rise to $4 after the first month. I think that model is more viable (and it also creates interest/excitement in the new stuff).

Fourth, I think the books you are talking about have print publications, so publishers don’t want the ebook price to cannibalize print sales. With print books, we became used to big discounts, but with ebooks it’s headed in the opposite direction. Low prices first — and then gradual increases. (I’m speaking about fiction; with nonfiction you pay for the usefulness of the subject matter, not how well-written it is).

What I’ve noticed now is authors and publishers publishing brief free or almost-free volumes — something which is self-contained or first of a series. There’s a lot of free or almost free ebooks out there under 20,000 words….

Amazon’s “$9.99” price didn’t apply to older e-books. It was only for new releases and bestsellers. Back when the Agency Model first burst onto the scene, Macmillan’s John Sargent wrote that he expected that their e-books would drop in price when the corresponding paperbacks came out. Whether that really happened (for Macmillan titles), I don’t know.

Re “when I expect that at some future date I will be able to buy them for significantly less?” The publishers have been doing this for decades. It’s officially called “inter-temporal price discrimination,” and for books it’s generally been hardback->paperback->remainder. The movie studios do it, too — if you wait long enough, the movie shows up at the $2 theater. A lot of people want to read (or see) the very latest *right now* and are willing to pay the price. Once that group has gotten its fill, prices are lowered to keep customers coming in. But that’s not what’s going on here.

The $2.99 is indeed a promotional price to try to get people to try the author. Unlike you (or me), most people *will* pay well for e-books from authors they like, and especially for e-books from a series they’re invested in. In the case of “City of Veils,” it’s trying to get people interested in “Kingdom of Strangers,” which was just released. As you noted, “Spycatcher” is being used as a promotion for “Sentinel.”

The Big Publishing Houses are increasingly relying on one thing: for most fiction readers, series are more addictive than crack. People will keep reading a series long after they’ve quit enjoying it, eagerly awaiting the next installment. Maybe some psychologist can explain why. In any event, the big publishers are coming to rely on this behavior. Nowadays, they’re mainly looking for novels that promise a big series run.

Sometimes the first hit is free, sometimes it’s 99 cents, sometimes it’s $2.99. But whatever the promotional price, the goal is to get the reader hooked.

The magic price is $5.99 based on supply and demand. I strongly disagree with the author that $2.99 is the future magic price point. Based on how people complain, it seems that most people have anchored on $9.99. As you price higher more people complain about ebooks being overpriced, as you price less more people start to see ebooks as a bargain. If there ever was a good price range for ebooks it would be $6-10. Promotional pricing for select titles is not a sign of hypocrisy from the publishers. It is to promote an author or a franchise. Let’s not overthink things.